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TMI Blog2023 (10) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... to the insolvency resolution or liquidation proceedings of the Corporate Debtor. The law is settled that an application can be entertained only when it raises a question which arises or relates to the insolvency of the Corporate Debtor. Judgment of the Hon ble Supreme Court in Embassy Property Developments Pvt. Ltd. [ 2019 (12) TMI 188 - SUPREME COURT] has also been relied upon by the Counsel for the Respondent. Embassy s case was a case where Adjudicating Authority has issued a direction to the Government of Karnataka to execute a supplemental lease deed for extension of mining lease which was held beyond the jurisdiction of the Adjudicating Authority - The judgment of the Embassy was a case where the Adjudicating Authority has issued direction pertaining to exclusion of supplementary lease which was in the jurisdiction of the Government under the MMDR Act, 1957. It was held that directions issued by the NCLT were beyond the jurisdiction vested in the NCLT. The Respondent cannot insist that unless the arrears of the electricity dues which dues were payable by the Corporate Debtor prior to disconnection are paid by the Appellant only then communication can be issued. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Steel Segments Centre Pvt. Ltd. participated in the e-auction and was declared successful bidder for Rs.11.40 Crores being 100% of the reserve price. Sale certificate was issued by the liquidator and successful bidder has given an acquisition plan detailing various reliefs and concession for which he has expressed willingness to approach the Adjudicating Authority. 2.3. I.A 144(KB)2021 was filed by the Appellant seeking various reliefs. The Adjudicating Authority disposed of the application by order dated 26.02.2021 granting various reliefs and concessions, with regard to certain other prayers, directions were issued which are contained in paragraph 6 of the order. The Appellant after having paid the entire sale consideration was handed over the assets of the Corporate Debtor. By order dated 26.02.2021, the Adjudicating Authority granted relief to the Appellant directing the concerned authorities to restore electricity and water connection upon application and payment of required fees/charges. Appellant wrote to the Respondent No.2 and made a request to restore the electricity supply at factory premises of Corporate Debtor. Various letters were written in August, 2021 by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.2019. Adjudicating Authority by the impugned order dated 01.09.2022 dismissed the application. Adjudicating Authority in rejecting the application relied on an earlier order dated 16.02.2022 passed in IA No.713 of 2021. It is useful to quote paragraphs 4 and 5 of the impugned order, which is to the following effect:- 4. This Tribunal faced with an identical situation passed an order on 16th February, 2022 paragraph 48 of the order is reproduced hereinafter:- In these circumstances, the question of maintainability is decided against the applicant. The application of the applicant is not maintainable before the NCLT because the electricity had been disconnected long before the CIRP actually started, for reason of non-payment of the outstanding dues. The CIRP process was initiated long thereafter. If the electricity had been disconnected on initiation of CIRP, then the position would have been different. 5. In these circumstances, question of maintainability is decided against the applicant. We are of the view this application being similar in nature is liable to be rejected. 2.5. Aggrieved by the impugned order, the Appellant has come up in this Appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2022. Regulation 8.4 of the Regulation relied by Respondent No.2 shall stand overridden in view of Section 238 of the IBC. Learned Counsel for the Appellant has also relied on the judgment of this Tribunal in Damodar Valley Corporation vs. Karthik Alloys- (2022) SCC OnLine NCLAT 109 . It is submitted that in view of the settled law, it be declared that the Appellant is not liable to make payment of pre-CIRP and post-CIRP dues of the Corporate Debtor with a direction to Respondent No.2 to restore supply of electricity to the factory premises of the Corporate Debtor. It is submitted that the due to non-supply of electricity inspite of Appellant being highest bidder of the Corporate Debtor as a going concern is unable to receive electricity connection which is against the object and purpose of the IBC. 5. Ms. Maninder Acharya, Learned Senior Counsel for Respondent No.2 refuting the submissions of the Appellant submits that the application filed by the Appellant under Section 60(5) was not maintainable. Electricity of the premises was disconnected on 11.08.2017 whereas CIRP was admitted on 27.09.2019. The disconnection was not related to or arising out of the insolvency of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier order dated 16.02.2022 passed by the Adjudicating Authority in IA No.713/KB/2021. Paragraph 48 of the order dated 16.02.2022 which is relied by the Adjudicating Authority is as follows:- 48. In these circumstances, the question of maintainability is decided against the applicant. The application of the applicant is not maintainable before the NCLT because the electricity had been disconnected long before the CIRP actually started, for reason of nonpayment of the outstanding dues. The CIRP process was initiated long thereafter. If the electricity had been disconnected on initiation of CIRP, then the position would have been different. 10. The reason given by the Adjudicating Authority is that the Application is not maintainable before the NCLT because electricity had been disconnected long before the CIRP actually started, for reasons of nonpayment of outstanding dues. 11. The submission advanced by the Counsel for the Appellant is that the impugned order as well as the judgment of the Adjudicating Authority in Badrinarayan Alloys Steels Ltd. (supra) dated 16.02.2022 is contrary to the judgment of this Tribunal in Eastern Power Distribution Company of Andh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive this Court observed that: (SCC p. 422, para 13) 13. One of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up of the insolvency process. The principle was reiterated in ArcelorMittal where this Court held that: (SCC p. 88, para 84) 84.... The non obstante clause in Section 60(5) is designed for a different purpose: to ensure that NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings. Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor. However, in doing so, we issue a note of caution to NCLT and NCLAT to ensure that they do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), application was held to be maintainable since the insolvency proceeding arose out of termination of PPA as was noted in the judgment. We may also refer to paragraph 91 of the judgment in Gujarat Urja Vikas Nigam Limited , which is as follows:- 91. The residuary jurisdiction of NCLT under Section 60(5) (c) of IBC provides it a wide discretion to adjudicate questions of law or fact arising from or in relation to the insolvency resolution proceedings. If the jurisdiction of NCLT were to be confined to actions prohibited by Section 14 of IBC, there would have been no requirement for the legislature to enact Section 60(5) (c) of IBC. Section 60(5) (c) would be rendered otiose if Section 14 is held to be exhaustive of the grounds of judicial intervention contemplated under IBC in matters of preserving the value of the corporate debtor and its status as a going concern . We hasten to add that our finding on the validity of the exercise of residuary power by NCLT is premised on the facts of this case. We are not laying down a general principle on the contours of the exercise of residuary power by NCLT. However, it is pertinent to mention that NCLT cannot exercise its juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party based on an ipso facto clause i.e. the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in relation to the insolvency of corporate debtor and it was amenable to the jurisdiction of NCLT under Section 60(5)(c). This Court observed that: (SCC pp. 262-63, para 69) 69... NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of corporate debtor... The nexus with the insolvency of corporate debtor must exist. (emphasis supplied) Thus, the residuary jurisdiction of NCLT cannot be invoked if the termination of a contract is based on grounds unrelated to the insolvency of corporate debtor. 29. It is evident that the appellant had time and again informed corporate debtor that its services were deficient, and it was falling foul of its contractual obligations. There is nothing to indicate that the termination of the facilities agreement was motivated by the insolvency of corporate debtor. The trajectory of events makes it clear that the alleged breaches noted in the termination notice agreement was dated 10-6- 2019 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case are limited. Judicial intervention should not create a fertile ground for the revival of the regime under Section 22 of SICA which provided for suspension of wide-ranging contracts. Section 22 of the SICA cannot be brought in through the back door. The basis of our intervention in this case arises from the fact that if we allow the termination of PPA which is the sole contract of corporate debtor, governing the supply of electricity which it generates it will pull the rug out from under CIRP, making the corporate death of corporate debtor a foregone conclusion. (emphasis supplied) 21. In Tata Consultancy Services Ltd. (supra), agreement was entered between the Appellant and the Corporate Debtor. Under the facility agreement, either party was entitled to terminate the agreement immediately by written notice. Termination notice was issued by the Appellant to the Corporate Debtor on 10.06.2019 which came into effect. Application was filed before the Adjudicating Authority for quashing the termination notice. In the above context, the observations as noted above were made by the Hon ble Supreme Court. 22. After noticing the law laid down by the Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. Reliefs/concessions sought Orders thereupon 1. Issue a direction/order thereby directing the concerned authorities to restore the electricity and water connection at the company office and plant on immediate basis, in absence thereof, the Applicant Company will not be in a position to resume work of the corporate debtor. Granted. The electricity and water connection shall be restored by the concerned authorities upon application and payment of required fees/charges by the Applicant Company 24. The reliefs and concessions which was granted by the Adjudicating Authority by the order dated 26.02.2021 clearly directed electricity and water connection be restored by the concerned authorities upon application and payment of required fees/charges by the applicant company. It is relevant to notice that the order dated 26.02.2021 was not challenged by Respondent No.2 and the said order has become final. IA No.984 of 2021 was filed by the Appellant when after the order of the Adjudicating Authority dated 26.02.2021 it has written several letters to Respondent No.2 for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Respondent No.2 was dealt with in the liquidation proceedings as per Section 53, it is not open for the Respondent No.2 to renew the said claim and insist for payment of entire dues which has been dealt in the liquidation process. In event the submission of the Respondent No.2 is accepted that even though its claim which was filed in the liquidation proceeding has been finally dealt with under Section 53 should again be allowed to renew and re-agitated when subsequent application is filed by the successful bidder that will be permitting claim to become alive even after it has extinguished in the liquidation proceedings. The interpretation put by Respondent No.2 is contrary to the whole object and purpose of the IBC. Corporate Debtor should have been liquidated and claim of all stakeholders has been dealt with and distributed, the stakeholders cannot be allowed to again re-agitate the claim against an entity which has taken the Corporate Debtor as a going concern. 26. This Appellate Tribunal has occasioned to consider the said question in Company Appeal (AT) (Ins.) No.78 of 2021- Damodar Valley Corporation vs. VSP Udyog Pvt. Ltd. wherein CIRP of the Corporate Debtor, DVC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd.- 2022 SCC OnLine NCLAT 85 . In the above case, Corporate Debtor was sold in e-auction and the liquidator allocated payment to respective creditors in terms of Section 53 and the liquidation process was prayed to be closed and thereafter on 18.06.2021, Uttar Haryana Bijli Vitran Nigam informed that an amount of Rs. 81,34,157/- is overdue against the Corporate Debtor. It was held that there being no claim having been filed by Uttar Haryana Bijli Vitran Nigam , the claim stands extinguished. In paragraphs 23 and 24, following was laid down: - 23. Adverting to the contention of the Learned Counsel for the Appellant that the Adjudicating Authority has erred in denying the sale of the 'Corporate Debtor' as a going concern to the Appellant without including any contingent liabilities, we hold that it is a settled law that when the sale proceeds of a 'Corporate Debtor' are duly distributed in the Order of priority and in the manner prescribed under Section 53 of the Code, claims of any other Creditor cannot be entertained contrary to the provisions entailed under Section 53; subsequent to the distribution of sale proceeds under Section 53 no other entity includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern, Corporate Debtor cannot be bounded by any past or remaining unpaid outstanding liabilities prior to the sale of the Company as a going concern. 30. The above judgment fully supports the submission of the Appellant. No liability can be fastened by Respondent No.2 of its past dues for which he has already filed a claim in the liquidation proceedings which stands satisfied as per distribution carried out by the liquidator under Section 53 of the IBC. Counsel for the Appellant has also referred to the judgment of the Hon ble Supreme Court in Telangana State Southern Power Distribution Company Limited and Anr. vs. Srigdhaa Beverages- (2020) 6 SCC 404 . Judgment of the Hon ble Supreme Court in the above case was a case where auction was conducted under the SARFAESI Act, 2002 and in the auction notice outstanding dues including electricity was also clearly mentioned. Paragraph 3 of the judgment is as follows:- 3. In order to appreciate the controversy before us, it is necessary to reproduce some of the relevant clauses of the auction notice:- The property described below is being sold on AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS under Rules 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry as regards any claim, charges/encumbrances on the properties, of any authority, besides the bank's charges and should satisfy themselves about the title, extent, quality and quantity of the property before submitting their bid. For any discrepancy in the property, the participating bidder is solely responsible for all future recourses from the date of submission of bid. 25. No claim of whatsoever nature regarding the property put for sale, charges/encumbrances over the property or on any other matter, etc. will be entertained after submission of the bid/confirmation of sale. 26. The authorised officer will not be responsible for any charge, lien, encumbrance, property tax dues, electricity dues, etc. or any other dues to the Government, local authority or anybody, in respect of the property under sale. 31. In the above context, after auction sale, question arose as to whether successful bidder is liable to pay electricity charges. It was in the facts of the above case that court held that there is no doubt that the liability to pay electricity dues exists on the respondent. In paragraphs 16.2, following was laid down:- 16.2. Where, as in cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor both pre-CIRP and during the CIRP? 34. This Tribunal also noticed paragraph 8.4 of the Regulations and laid down following in paragraph 13 : - 13. When in the IBC proceedings, the Appellant has lodged his claim before the Liquidator pertaining to pre-CIRP dues, the same has to be dealt with as per the provisions of the Code. Pre-CIPR dues of the Appellant have been treated as operational debt and the same required to be paid as per Section 53 of the Code. The payment under Section 53 of all debts including operational debt has to be made in accordance with Section 53. Thus, the Appellant is entitled to receive pre-CIRP dues as per provisions of section 53. Hence, the Appellant cannot be heard in contending that he should realize the said amount from the Successful Auction Purchaser. The claim of the Appellant to realize the pre-CIRP dues from Successful Auction Purchaser is clearly in conflict of the statutory scheme as laid down in the Code. 35. Earlier judgments of the Appellate Tribunal in Shiv Shakti Inter Globe Exports Pvt. Ltd. and Damodar Valley Corporation vs. Karthik Alloys (supra) were also relied by this Tribunal. The submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Supreme Court dated 11.09.2023 in Civil Appeal No.5556 of 2023- Tata Power Western Odisha Distribution Limited (TPWODL) Anr. vs. Jagannath Sponge Private Limited . Appellant in the above case was also insisting for payment of arrears of electricity dues. The Hon ble Supreme Court relied on the earlier judgment of the Hon ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Private Limited Ors.- 2023 SCC Online SC 842 and has also noted the judgment of the Hon ble Supreme Court in Embassy Property Developments Pvt. Ltd. and distinguished the same. It is useful to extract the entire judgment of the Hon ble Supreme Court dated 11.09.2023, which is to the following effect:- In our opinion, the legal issue is covered by the judgment of this Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Private Limited and Others 1 and the order of this Court in Southern Power Distribution Company of Andhra Pradesh Limited vs. Gavi Siddeswara Steels (India) Pvt. Ltd. and Another. 2 The appellant Tata Power Western Odisha Distribution Limited cannot insist on payment of arrears, which have to be paid in terms of the waterfall mechanism, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Tata Power Western Odisha Distribution Limited (supra), submission advanced on behalf of the Respondent- Damodar Valley Corporation cannot be accepted. The Respondent cannot insist that unless the arrears of the electricity dues which dues were payable by the Corporate Debtor prior to disconnection are paid by the Appellant only then communication can be issued. The stand taken by the Respondent is contrary to the law laid down by this Tribunal as well as the Hon ble Supreme Court as noted above. 39. In view of the foregoing discussions, we are satisfied that the Adjudicating Authority committed error in rejecting IA No. 984 of 2021 as not maintainable. We hold that the application is fully maintainable under Section 60(5) for the reasons as indicated above. The Appellant has made out a case for grant of reliefs as claimed in the application. In result, we allow the Appeal in following manner:- The impugned order dated 01.09.2022 is set aside. IA No.984 of 2021 is allowed. Respondent No.1 to grant fresh connection of electricity after taking all necessary charges for fresh connection except outstanding dues of the Corporate Debtor which stood satisfied and extinguished ..... X X X X Extracts X X X X X X X X Extracts X X X X
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